BofA’s framing puts oil at the centre of the gold trade: as long as the Iran war keeps crude elevated, the bank sees energy-driven inflation, rising yields and a firmer dollar outweighing gold’s haven appeal. That makes oil headlines, including any further disruption to Gulf shipping, a direct bearish risk for bullion rather than a supportive one. With the Fed on a hiking path, any upside inflation surprise from energy costs would reinforce the yield pressure the bank identifies. A sustained retreat in crude, or progress toward a Middle East resolution, is the clearest trigger for the recovery BofA projects into 2027, while a break toward $3,750 would test whether ETF holders stay patient.
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Bank of America still sees $5,000 gold, but only after the Iran war stops feeding oil, yields and the dollar, and it fears nervous ETF holders could make the wait painful.
Summary:
- BofA forecasts gold averaging $5,000 in Q2 and Q3 2027, with a 2027 full-year average of around $4,800
- The bank sees a Q4 2026 average of $4,000, with a risk of prices falling toward $3,750
- Since oil topped $90 on 20 August, gold has fallen about 8% as oil, the dollar and yields have risen
- A $150 oil price, not the base case, could cut gold’s 2027 average to about $3,500
- Fragile ETF positioning and possible central bank selling, after about 60 tonnes were sold in Q2, are key downside risks
- Investment demand currently supports prices only around $4,000, BofA estimates
Bank of America has stuck with its bullish long-term view on gold, forecasting quarterly averages of $5,000 an ounce in the second and third quarters of 2027, but has warned that the Iran war and fragile investor positioning could drag prices sharply lower first.
In its latest metals strategy outlook, dated 30 September, and getting coverage in media, the bank forecast an average gold price of $4,000 for the fourth quarter of 2026, with a risk that prices fall toward $3,750 during the period. It kept its 2027 full-year average forecast at around $4,800.
The bank’s caution centres on oil. Since crude moved above $90 a barrel on 20 August, gold has fallen about 8%, while oil has risen around 15%, the dollar index has gained more than 2% and both nominal and inflation-adjusted yields have climbed by around 50 basis points. In BofA’s assessment, higher energy prices keep inflation pressures alive and encourage tighter monetary policy, while rising yields and a firmer dollar reduce gold’s appeal, a combination that has outweighed the metal’s role as a geopolitical haven.
The bank sees an oil spike as the biggest threat to its forecast. Should prolonged Middle East tensions push crude to $150 a barrel, which BofA does not expect, it estimates gold would average about $3,500 in 2027, leaving the Iran war as the key headwind.
Positioning is the other vulnerability. BofA said holders of physically backed gold exchange-traded funds have largely stayed invested despite the pressure, with many expecting a recovery later. The bank regards that confidence as fragile and warned that, without a resolution to the Middle East conflict, a rapid unwind could push prices down quickly.
Central banks add a further risk. BofA noted that official buyers turned net sellers in March, when higher oil prices strained the currencies and current accounts of energy-importing nations, and that central banks, led by Turkey, sold about 60 tonnes in the second quarter. The bank sees a risk of renewed selling that could compound any retail ETF liquidation.
Investment demand remains central to the longer-term view. BofA said in January that demand would need to rise by around 14% to sustain prices near $5,000. Although demand has picked up and held firm, the bank estimates it currently supports prices only around $4,000, and it considers a further acceleration unrealistic for now while the war continues.
The bank’s longer-run case rests partly on concerns about US fiscal sustainability and economic policy. Its outlook therefore depends on energy and rate pressures easing, rather than on gold benefiting automatically from heightened uncertainty.
This article was written by Eamonn Sheridan at investinglive.com.